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Dec 16, 2008

9500 layoffs by DHL & ABX Air hit Wilmington, Ohio

As hard times go, this is about as hard as it gets. The single-biggest employer in these parts is laying off about 7,500 men and women.

In a town of fewer than 13,000 people. In the midst of the worst financial crisis in generations.

"It's going to test us," says Mayor David Raizk. "The numbers are frightening."

Those numbers came in a Nov. 10 announcement by Deutsche Post World Net, the German owner of package-delivery company DHL. After investing five years and nearly $9 billion, DHL is abandoning its ill-starred effort to compete in the United States with FedEx and UPS. Winding down its U.S. business will eliminate 9,500 DHL positions around the country plus thousands more here at the company's local partner, ABX Air.

DHL, which has long struggled in the U.S., said in May that ABX would likely lose business that supported thousands of workers. But the global financial crisis magnified shareholder pressure on DHL's German owner and accelerated the erosion at the No. 3 company in a three-company market, triggering DHL's exodus. Exposure to bankrupt investment bank Lehman Bros. blew a $450 million hole in third-quarter earnings at the German giant's banking subsidiary, while DHL's customers grew tightfisted amid the spreading economic malaise.

Now, the rise in unemployment happening across the USA is appearing here in concentrated form. One of every three Wilmington households will be hurt by DHL's exit. From pilots to avionics technicians to package handlers, waves of people in several counties are losing their paychecks in a place and at a time when well-paying jobs are as precious as diamonds. And, in rural Ohio, about as easy to find.

The sad truth is there's no way the local economy can sprout paychecks for all who will need them. Some people who've called this solid, unremarkable town home their entire lives will be forced to leave. Others will stay but will find getting by a whole lot harder. "I really don't want to (leave) unless I have to," says pilot Bill Kocher, 47. "I was born and raised here. I like the town. I like the school my daughter's in. I like the church we go to."

It hasn't gone unnoticed here that as times got hard in other industries, people with more money and better connections lined up in Washington, D.C., with their well-manicured hands out. Wilmington received an emergency $3.8 million Labor Department grant to help retrain the newly jobless. But no one here expects Uncle Sam to ride to the rescue.

This community's self-image is one of straightforward, hardworking Midwesterners, the sort of people who continue to produce for the boss even after the boss says he's putting them on the street. Since learning that its contract with DHL would be ending, ABX has delivered 99% of its packages on time, says ABX spokeswoman Beth Huber.

Hardest hit among the affected workers will likely be those in the package-sorting operation, most of whom don't have a college degree. The "sort" jobs pay well, about $16 an hour, and offer good health insurance benefits.

Wilmington native Chris Haidet, 45, went to work at ABX straight out of high school 27 years ago. He remembers the excitement in town when the first McDonald's opened and the thrill of the company's first giant DC-8 cargo jet. "You could walk under the airplane," he says. "People were in awe."

Haidet raised three kids here. A daughter works in Cincinnati. A second cuts hair at the local Wal-Mart. His son has traded dreams of attending graphic-design school for what his dad says is now "the only guaranteed job around": a slot in the U.S. Marine Corps.

Three dozen of Haidet's co-workers got their pink slips on Nov. 20. Maybe two have new jobs lined up. Haidet's wife has children from an earlier marriage and won't leave Wilmington. He hopes to find something in Dayton, Columbus or Cincinnati. But all three cities are about an hour's drive away, quite a change from his four-minute commute.

Walk along the streets of Wilmington's historic downtown and the storefront names seem lifted from a Frank Capra film. Smith's Barber Shop, First National Bank, A&A Insurance, Granny's Country Cupboard. This is small-town America from an era when most of America was small-town.

"You know that nostalgic picture you have in your mind of what a hometown should be? Well, the way it should be is the way it is in Wilmington," says Molly Dullea, 51, who moved here five years ago to buy the 80-year-old General Denver Hotel.

Dullea says about 30% of her business is from ABX pilots who live outside the area and spend occasional nights at the General Denver. She worries that the venerable hotel, a landmark boasting perhaps the best restaurant in town, may be among the one-in-five local businesses the mayor expects will fail.

First settled in 1810 as a plot of "16 squares of eight lots each," Wilmington isn't much more populous today than it was two centuries ago. The aging neighborhoods at its core contain modest, clapboard homes arrayed on streets named for states, such as Kentucky or New York.

In recent years, new strip malls full of familiar, modern names such as CVS, Staples, McDonald's and Wal-Mart arose on the city's eastern rim. Some folks wonder how long the national chains will linger as the pink slips mount.

The economic heart of the region has long been the Airborne Airpark, the airport business park named for the delivery company that was ABX Air's corporate ancestor. In 2003, DHL acquired Airborne Express as part of its bid to become a global carrier able to challenge FedEx and UPS on their home turf.

U.S. trade rules limiting foreign companies to minority stakes in domestic airlines forced a spinoff of Airborne's airplanes into a new company called ABX. The regulations thus saddled DHL with a less-efficient, higher-cost operation than its rivals.

DHL planned to marry its international prowess with Airborne/ABX's domestic footprint. Success was elusive and made more so by missteps, such as a botched 2005 consolidation of package-handling operations in Cincinnati and Wilmington, which left packages stacked in idle rows and cost DHL 10% of its domestic business.

As the financial losses multiplied, DHL announced in May a major restructuring of its U.S. operations that would shift its domestic air business from ABX to rival UPS. The announcement meant that several thousand ABX workers eventually would be jobless, though it left about 1,000 ABX ground employees hopeful of continued work.

But as negotiations with UPS continued, and the economic picture darkened, DHL opted for a more draconian strategy. On Nov. 10, the company announced it would exit the domestic package-delivery business entirely. From the end of January, DHL will handle only international shipments into and out of the U.S. "The financial crisis was the final nail in the coffin," says Dave Ross, who heads Teamsters Local 1224, representing ABX's pilots.

Of 550 active pilots, perhaps 50 can expect to find new flying jobs, Ross says. The rest will likely drift into teaching or the military reserves.

Bill Kocher, who rose to Boeing 767 captain after starting 28 years ago as a part-time package sorter, knows there are few jobs for pilots in a small town midway between Columbus and Cincinnati. A handful of his co-workers have caught on with foreign carriers such as Korean Air or Emirates. But neither moving to Dubai nor being away from home for weeks at a stretch appeals to him. So he's getting ready to ratchet down his standard of living, one notch at a time.

Kocher wouldn't disclose his salary. But annual base pay for ABX captains is $186,000, and some make upwards of $200,000 or even $300,000. If he's lucky enough to secure a job with one of the rare airlines that are hiring, such as Virgin America or Southwest, he'd make just $30,000 during a one-year probationary period.

His 9-year-old daughter goes to a costly private school. Kocher realizes other layoff victims confront more wrenching financial sacrifices, but he can't bear the thought of upending her young life to save money. His wife, Tammy, who hasn't worked outside the home for a decade, is scrambling to find a job in the worst job market in a quarter-century.

"I can't sleep," he says, over coffee. "I will sell my house and downsize so I can keep my daughter in that school. She's grown up with all these kids."

The road ahead

Such individual dramas are becoming common in communities like Wilmington. This corner of southwestern Ohio has been slipping behind for years, reflecting the erosion of American manufacturing and its relatively high-wage blue-collar jobs.

In 1970, per-capita personal income in Clinton County was about 10% below the national average. It fell further back in the late 1980s, then crept closer to the national average during the late-1990s boom. Since then, local prospects have declined. County residents now earn about 20% less than people elsewhere.

As people here brace for the layoffs, there's plenty of finger-pointing. Some say DHL just never understood the domestic market. Some say Joe Hete, CEO of ABX Air's corporate parent, blew it when he rebuffed a DHL-supported takeover bid from another air carrier called Astar. A merger would have given DHL the single air partner and lower costs it coveted. Hete says Astar never made a formal offer. But its "indication of interest" valued ABX at $7.75 a share; shares of the parent company, Air Transport Services Group (ATSG), closed Monday at 24 cents apiece.

Still, identifying corporate culprits won't bring the jobs back or create ones to replace them. ABX hopes to remain in business, perhaps as a smaller outfit offering maintenance and repair services to other airlines. That could save a few hundred jobs.

The Chamber of Commerce is planning a benefit concert for mid-January. Karen Haley, the chamber president, talks hopefully of converting the airpark to alternative energy production.

Volunteers at a local Methodist church counsel workers on retraining options or scarce job leads. And Mayor Raizk says he's confident that in five years Wilmington will be back to where it was, just as good as ever. Left unsaid is how people will get from today to five years from today.

"I don't think it's going to be a ghost town like some people say. … It's going to be all right," says Kocher. "It's just not going to be the same."